(!) We use cookies to give you the best possible experience on our website. By continuing to browse this site, you give consent for cookies to be used.
For more details, please read our
cookie policy (!)

An increase in spending by Web 2.0 companies will help to counteract the decline in service provider capital expenditure, according to market research firm LightCounting in its “August 2015 Market Forecast and Database”.

The 15 web content companies in LightCounting’s Internet Index collectively spent $19 billion on servers, network equipment, and other property and equipment in the first six months of 2015 – up 16 per cent from the same period last year.

The top five spenders – Amazon, Apple, Facebook, Google, and Microsoft – collectively spent $16.2 billion in the first six months of 2015, 84 per cent of the total for the entire Index. Google was the biggest spender, recording outgoings of $5.4 billion, followed by Apple at $4.4 billion.

Chinese companies, which make up only 6 per cent of the Index in terms of revenues, increased spending by 56 per cent year-on-year. Tencent spent $672 million, an increase of 101 per cent year-on-year more while Alibaba spent $527 million, an uplift of 86 per cent.

Meanwhile capex spending of the top 15 service providers declined by the same amount in percentage terms in over the first six months of the year. Capex is forecast to decline by 6 per cent for the full year.

Unfortunately, the changes won’t cancel out, because the service provider market is larger. Service provider capex is forecast to total $184 billion for the full year, while service provider revenues are expected to reach $992 million in 2015, according to LightCounting.

Overall, service provider revenue is expected to be down 6 per cent compared to 2014. This would be the first decline since 2009 and the first time revenues have dipped below one trillion dollars since 2010, the market research firm points out.

The depressed figures are due mainly to the strong dollar. In Europe, network investment is up in euro terms, while Japanese operators continue to report revenue growth in yen in the first half of 2015. The devaluation of the yuan compounded the weaker performance of Chinese operators.

In spite of these challenges, LightCounting still reckons there is a good chance that the market for optical components and modules will deliver, in 2015, the highest annual growth since it increased by more than 30 per cent in 2010.

However, it will take a strong fourth quarter to keep the optical networking market growth on track. Some of the big 100G projects were pushed out to the very end of the year. Any further delays will derail LightCounting’s latest projections for 25 per cent growth in sales of optical components and modules this year. Another concern is ability of suppliers to keep up with strong demand for FTTx optics and some of the new products such as DWDM CFP transponders.

The worldwide consumption of planar lightwave circuit (PLC) splitters reached $789 million in 2016, up 13.4 per cent from 2015, according to the latest report from market and technology consultancy ElectroniCast Consultants.